Social economy

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Not to be confused with socioeconomics or social market economy.

A social economy is a third sector among economies between the private (business) and public sectors (government). It includes organizations such as cooperatives, nonprofit organizations and charities. Social economy theory attempts to situate these organizations into a broader political economic context. In particular it investigates the economic viability of cooperatives and the value of non-profit organizations and charities in traditional economic theory.


Third sector[edit]

Social economy studies the relationship between economy and social behavior. It analyzes how consumer behavior is influenced by social morals, ethics and other humanitarian philosophies. The social economy examines activity that is related to economics amongst the community and exposes the information to the community, this includes the social enterprise and voluntary sectors.

A social economy develops because of a need for new solutions for issues (social, economic or environmental) and to satisfy needs which have been ignored (or inadequately fulfilled) by the private or public sectors. By using solutions to achieve not-for-profit aims, a social economy has a unique role in creating a strong, sustainable, prosperous and inclusive society.

Successful social-economy organisations play a role in fulfilling governmental policy objectives by:

  • Increasing productivity and competitiveness
  • Contributing to socially-inclusive wealth creation
  • Enabling individuals and communities to renew local neighbourhoods
  • Demonstrating new ways to deliver public services
  • Developing an inclusive society and active citizenship

Defining the limits of a social-economy sector is difficult due to shifting politics and economics; at any time organisations may be "partly in, partly out", moving among sub-sectors of the social economy.

Social enterprise compass[edit]

Organisations may be placed on the social enterprise compass, which measures enterprises and organisations on a continuum between the private and public sectors.

Social economy compass.jpg

Horizontal axis

On the horizontal axis, each enterprise or organisation is categorized by its ownership. On the left side ownership is by public authorities, and on the right side it is private industry. "Private industry" encompasses all economic activity with the capital of one (or many) private owners, with a view to making a profit. The capital owners bear the risk. “Public authorities” encompass all economic activity in which public authorities possess the capital at the European, federal, regional or local level; this includes nationalised and public industries.

Vertical axis

On the vertical axis each enterprise or organisation is categorized by its primary objective, from "social purpose" at the top to "commercial purpose" at the bottom. Social purpose is the primary objective of the enterprise if it meets the following criteria:

  • Ethical concept: Core definition
  • Mission (key identification): The enterprise's primary objective is improving the lives of disadvantaged people, social cohesion and support.
  • Social economic creation of value and appropriation of earnings (qualitative key identification): Profits and resources are verifiably reinvested for the benefit of disadvantaged people.

If these criteria are met, an organisation is at the top of the vertical axis.

One criterion is a descriptive feature:

  • Intermediary function: Social economical enterprises and organisations have an intermediary function (between public and private).

If none of the above criteria is met, or the primary object of the enterprise is commercial, it is located at the bottom of the vertical axis.

Between social and commercial purposes

If the above criteria are partially met, the enterprise is located along the vertical axis according to its self-definition.

International comparisons[edit]


The term "social economy" derives from the French économie sociale, first recorded about 1900. The sector comprises four families of organisations: co-operatives, mutuals, associations (voluntary organisations) and foundations (which, in France, must be of "public utility"). The social economy is a major sector, representing 12 percent of employment and GDP.[citation needed]


In Spain, the concept of economía social is recognised in the academic, political and economic fields. A national confederation of social-economy enterprises, CEPES, includes worker-owned companies (or cooperatives) and mutualities.

In Spain, the social economy represents nearly nine percent of employment.[citation needed] The first Law of Social Economy in Europe was scheduled to be approved in Spain in early 2011.[citation needed]

Latin America[edit]

In Spanish-speaking Latin-American countries (such as Argentina, Venezuela and Cuba) the concept of economía social is accepted. The government of Hugo Chávez believed that the informal sector could be absorbed into the social economy of Venezuela by strictly controlling (or nationalising) large firms and creating new forms of private enterprise which were more accessible to the poor.[citation needed] Wage labour was seen as a source of exploitation, and the government hoped to reduce (or eliminate) it by promoting corporate governance, family and cooperative businesses and restricting labour contracts.[clarification needed] The government planned to provide technology, training, finance and exclusive contracts to small enterprises so that they could survive in the national marketplace.

European Union[edit]

At the European level, the French concept predominates. In 1989, the Delors Commission established a Social Economy Unit to coordinate the movement at the European level; however, official texts adopted the term "Co-operatives, Mutuals, Associations and Foundations" (CMAFs). Social economy is one of the nine themes of the €3 billion EQUAL Community Initiative. In Ireland, the social economy is well-funded; an example is rural transport schemes to assist the socially disadvantaged in isolated locations.

The European Economic and Social Committee has published a study drawn up by CIRIEC (International Centre of Research and Information on the Public, Social and Cooperative Economy)[1] on the social economy in the European Union, available in the 21 official languages of the Union.[2]

United Kingdom[edit]

Scotland emphasises the social economy more than social enterprise.[citation needed]

New Zealand[edit]

In New Zealand, there is an Office for the Community & Voluntary Sector; however, a research programme is in progress as the Study of the NZ Non-Profit Sector.[3]

United States[edit]

The designation of sectors in this region is ambiguous. In the United States, it is equivalent to industry; the Organisation for Economic Co-operation and Development (OECD) defines sectors differently, depending on the statistical purpose. A sector can be a grouping of institutions, such as by government (taxing authority), business (taxable profit-making), philanthropy (untaxed nonprofit), and household (taxable personal income). In the United States, where business preeminence is emphasised, organizational form differentiates conventional and hybrid business forms (with the latter, hybrid organization having a social mission while pursuing profit). This is acknowledged in the tax codes of several states with such entities as the benefit[4] and for-benefit corporations.[5] Although they are similar, they are not identical. This "fourth sector" differs from the third sector by its location (in the United States) and its emphasis on business (as opposed to government) leadership in the voluntary sector. Outside the United States governments establish national plans for the third sector, which formalizes the role of governments. In the U.S. such governmental planning is discouraged; market-based mechanisms are emphasised, such as social entrepreneurship. A discussion of sectors and social economy is in Business with a Difference: Balancing the Social and the Economic by Mook, Quarter and Ryan, produced with the support of the Social Sciences and Humanities Research Council of Canada and furthering the work of the Association of Nonprofit and Social Economy Research (ANSER).


The cooperative movement in India has made remarkable progress, working more than 600,000 cooperatives and 250 million members, making it the largest cooperative movement of the world. Cooperatives have a huge network and unparalleled reach, with 100% coverage in 500,000 villages. Cooperatives play a pivotal role in the mainstream of Indian economy, particularly in the fields of agriculture & rural credit, distribution of agricultural inputs, storage, fertilizer, marketing, labour, micro finance and housing. [6] and cooperatives are working towards inclusive growth, cooperative ideals and cooperative organization are more effective in meeting their people centered objectives. Cooperative provides third highest employment after private sector and government jobs. [7] Social economy attempts to suitably blend economic feasibility with social reality. The cooperatives in India emphasize on equitable distribution of value amongst stakeholders.

See also[edit]


External links[edit]

Further reading[edit]

  • For All The People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America, PM Press, by John Curl, 2009, ISBN 978-1-60486-072-6